Unions deny wage claims driving fall in business confidence

Claims a "barrage of wage demands" is a major driver of the plunge in business confidence reported today have been played down by unions.

The latest National Bank Business Outlook survey released today showed a net 48 per cent of firms expected general business conditions to deteriorate over the next year up from just 19 per cent last month. Another of the survey's key indicators -- which shows how firms feel about their own prospects for the coming year -- dropped from a net 30 per cent being optimistic to just 15 per cent.

ANZ National Bank's chief economist John McDermott said some of the factors behind the rising pessimism were the continued strength of the New Zealand dollar, high interest rates, a dipping sharemarket and the new petrol tax.

"Moreover, businesses are now being hit with a barrage of wage demands in response to skill shortages and perceptions that employees have not shares in the benefits of the economic expansion," he said.

But Council of Trade Unions economist Peter Conway said blaming workers' push for pay increases, which had been a long time coming, for the loss of business confidence was "a bit of an overreaction".

"Certainly there a few strikes... but there's two million workers out there, a few thousand strikes isn't even close to 1 per cent. Strikes are at a historically low level ," he told National Radio this morning.

The country's largest union, the Engineering Printing and Manufacturing Union (EPMU) earlier this year launched its "Fair Share -- Five in 05" campaign for a five per cent across-the-board pay rise for workers.

Today, EPMU national secretary Andrew Little said there was no reason why industrial action should dent business confidence, which had likely fallen due to the recent shift in economic conditions.

"I don't think the level of industrial action that we're seeing at the moment is at all a cause for concern."

Meanwhile, Employers and Manufacturers Association chief executive Alasdair Thompson said recent industrial action may be having an effect on business confidence, but of more significance was increasing compliance costs around the Holidays Act.

Phil O'Reilly of Business NZ said the threat of industrial action was just one of many factors including the high dollar, petrol prices and economic slowdowns overseas crimping local business optimism.

ANZ National's Dr McDermott this morning warned that higher wages would come at a cost.

Interest rates will need to move higher to combat the potential impact on inflation, competitiveness will be eroded -- which ultimately results in fewer jobs.

Dr McDermott said inflation rate looked set to push through the top of the Reserve Bank's 1 to 3 per cent policy band.

He expected the Reserve Bank to keep the official cash rate unchanged at 6.75 per cent on Thursday, but said the risk profile for interest rates was for hikes over the next 12 months.

- NZPA